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File-Swap Sites Not Infringing, Judge Says

Firms Held Blameless For Copyright Violations

By Frank Ahrens
Washington Post Staff Writer
Saturday, April 26, 2003; Page E01

A federal judge in California ruled yesterday that the Internet's most popular music-swapping services are not responsible for copyright infringements by users. It is a potential victory for the millions of people who share songs over the Internet, and a blow to record companies trying to shut down systems that enable what they consider to be theft.

The surprise decision -- which likened music-sharing services to companies that sell VCRs -- was counter to a series of victories for the recording industry in recent years, specifically the 2001 lawsuits that led to the closing of Napster, the seminal and dominant Internet song-sharing service of the 1990s. Since the end of Napster, it was generally thought that the legal tide had turned against free song-swapping on grounds of copyright infringement. Performers are not paid royalties and record companies don't make money on songs traded free on the Internet.

_____From FindLaw_____
Order: MGM v. Grokster (PDF)
Complaint: MGM v. Grokster (PDF)
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The Recording Industry Association of America, which represents the music industry, and the Motion Picture Association of America -- which is attempting to stanch the free sharing of movies on the Internet -- sued StreamCast Networks Inc. and Grokster file-sharing services in 2001, asking the court to order them closed. StreamCast is the parent of the Morpheus song-sharing service.

U.S. District Judge Stephen V. Wilson's decision yesterday "is significant in part because it breaks the wave of copyright holders prevailing in their claims on new mass-media types of infringement," said Megan E. Gray, a Washington lawyer who specializes in intellectual property. "Upon scrutiny, the [plaintiffs'] case breaks down in several places and they cannot prevail."

The record industry has blamed its current recession on what it calls Internet music piracy. CD shipments fell 9 percent in 2002 compared with 2001, while online CD sales have dropped about 20 percent in the past year, according to Comscore Networks, which tracks Internet use.

Music companies have moved aggressively in the courts to target illegal song-swappers. Earlier this month, the music industry sued four college students that it alleged were running illegal song-swapping Web sites.

Grokster and Morpheus argued that song trading is only one use for their file-sharing systems, which also host legal activities. Suits designed to protect copyright were instead harming useful and important technology, the defendants argued.

In yesterday's decision, Wilson invoked the landmark 1984 Sony Betamax case, ruling that the defendants are "not significantly different" from companies that sell VCRs and photocopiers. In essence, he ruled that product makers are not responsible for what consumers do with the products.

"When users search for and initiate transfers of files using the Grokster client, they do so without any information being transmitted to or through any computers owned or controlled by Grokster," Wilson wrote. "Neither Grokster nor StreamCast provides the site and facilities" for direct copyright infringement.

Morpheus and Grokster differ from Napster in that Napster used a centralized server and song-index system, which meant it could be held directly accountable for the actions of its users. Since Napster's demise, file-sharing systems such as Morpheus have moved to decentralized servers, which removes their liability, the judge ruled. If Napster was a song warehouse, Morpheus is a bloodhound: Users ask for songs, and Morpheus shows where those songs are stored on other users' computers.

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